The Enforcement Directorate (ED) on Tuesday said it has issued a show-cause notice to edtech giant Byju’s and its founder Byju Raveendran for various violations of the Foreign Exchange Management Act (Fema) totalling ₹9,362.35 crore.
Byju’s breached Fema’s provisions by “failing to submit documents of imports against advance remittances made outside India, by failing to realize proceeds of exports made outside India, by delayed filing of documents against the foreign direct investment (FDI) received into the company, by failing to file documents against the remittances made by the company outside India and by failing to allot shares against the FDI received into the company,” the investigation agency said in a statement.
The ED had searched several offices of Byju’s and residences of its top executives on 24 and 28 April. At the time, the agency had said that Byju’s had received over $3.43 billion (about ₹28,000 crore) in foreign capital between 2011 and 2023, and that it had sent ₹9,754 crore in foreign direct investments abroad.
The amount of capital any entity or individual can send overseas is governed by Fema.
On Tuesday, the agency said that during the search, it had “seized documents pertaining to all investments received by the company as well as documents pertaining to overseas investments.” It said it had also recorded statements from founder Byju Raveendran and the company’s chief financial officer Ajay Goel. Goel left the company in October.
Following news reports about the ED notice earlier in the day, Byju’s had “unequivocally” denied the development. “The company has not received any such communication from the Enforcement Directorate,” it said. It also separately wrote to its shareholders that a top law firm had conducted due diligence clearing the edtech firm of any Fema violation, adding it had not received any such notice.
“We are attaching an email from one of India’s largest and most trusted law firms, which highlights the results of a comprehensive due diligence conducted on Byju’s. The email confirms that the due diligence found no Fema violations at Byju’s,” the company said in the letter to shareholders seen by Mint. “We want to assure you that Byju’s has always been fully compliant with Fema regulations,” the letter said.
“Byju’s has maintained a cooperative stance with the ED throughout their inquiries. We have satisfactorily answered all their queries, both verbally and on record,” the letter said. The firm told shareholders that it “continues to operate in full adherence to regulatory frameworks.”
However, an ED statement later in the day said it has indeed issued the show-cause notice; a Byju’s spokesperson did not respond to this development.
Byju’s is backed by several large investors such as Tiger Global, General Atlantic, Sequoia Capital (now Peak XV Partners) and Prosus Ventures. The company has made several overseas acquisitions in the past including reading platform Epic! Creations Inc. Byju’s had previously said that it moved money overseas to make acquisitions and for other marketing expenses.
The company had previously failed to file FY22 statements on time.
In November, Byju’s filed its FY22 financial statements, reporting a rise in revenues in the core K12 business to ₹3,569 crore in FY22 from ₹1,552 crore in the previous year. It said its losses at the Ebitda level for the core business amounted to ₹2,253 crore, down from ₹2,406 crore. These financials do not include revenues and losses of any of its subsidiaries.
The company has faced an onslaught of problems this year with its investors stepping down from the board. It also saw its auditor Deloitte Haskins & Sells leave in June, citing non-response from the company management over financial information.
Byju’s has managed to settle the debt owed to one of its lenders, Davidson Kempner, earlier this month by securing capital of ₹1,400 crore from the family office of Manipal Group’s Ranjan Pai. It is also planning to sell subsidiaries Epic and Great Learning to raise money and settle $1.2 billion it owes its US lenders.